New Hope for Californians

The state of California has announced a new program to help first time buyers buy and banks with REO's in certain areas sell those properties to the benefit of both groups. The California Housing Finance Agency has received a $200 Million allocation of bond funds for use in the Community Stabilization Home Loan Program. This will likely help between 800 and 1,000 Californians buy their first home.
It's only available for specific REO properties owned by one of the four following banks: Wells Fargo, HomeEq, CitiMortgage and Fannie Mae. All of these lenders have agreed to price the properties at 12% below market value.

The program also only applies to the following areas: the counties of Merced, San Joaquin, Riverside and Stanislaus. Also covered are certain specific Zip Codes in Alameda, Contra Costa, LA and San Bernardino counties. It will provide 30 year fixed rate loans at 5.5%, with no down payment. Borrowers must pay the expense of mortgage insurance. There are also certain income limits for borrowers. This can be found at links.sfgate.com/ZEGL .

The Fed Speaks!

For those of you who look at foreclosures as a possible investment, as well as anyone else looking to finance a real estate purchase, the Fed announced new regulations last week. Basically, the Fed is now requiring that banks perform full due diligence before making a real estate loan. This means that from now on, banks will be acting more responsibly in deciding who borrows and who is denied. Instead of taking a borrower's word for it on income, the lender will require proof of income. Stated income loans are, happily, a thing of the past (they never should have been allowed in the first place). Lenders will also have to be more careful in the appraisals they accept for a property.

What all of this means is that the lenders will be doing what they historically used to do before greed and stupidity took over much of the lending process.

Good News for Maryland

The state of Maryland has recently enacted some new legislation to help those facing foreclosure. In one case, homeowners will have extended periods of time to attempt to resolve their default situations before a foreclosure can be completed on their homes.
Separately, lawyers doing pro bono (free) work for homeowners facing default/foreclosure can assist in one of three ways: 1.) direct representation of the homeowner; 2.) brief assistance and advice to the owner; and 3.) Of Counsel representation. In the third case, they would act to assist regular counsel for groups offering assistance to homeowners. This initiative's importance was given added emphasis by an open letter sent to all attorneys in the state by the Chief Justice of Maryland's Court of Appeals, Justice Bell.

Finally, the State Bar has published a free booklet for homeowners on benefits under new foreclosure assistance laws in the state.

Governor Signs Bill in California!

Last week I mentioned that the California legislature had sent a bill to Governor Schwartzenegger providing for some preventive action, as well as tenant protection in a foreclosure.
Yesterday, July 8, the governor signed the bill, SB1137, into law. It forces lenders to contact defaulting homeowners sooner in the foreclosure process to attempt to work out some non-foreclosure resolution to the problem where possible. It also requires that once a property is foreclosed upon, the lender must provide the tenants 60 days notice to move instead of the previously mandated 30 days.

It also provides local communities the right to pass ordinances that would require the foreclosing lender to maintain the outside appearance of the property so as to avoid urban blight that often comes when a home remains vacant for a long period.

In California, Some New Help!

Yesterday, July 2, 2008, the California State Senate overwhelmingly passed and sent to Governor Schwartzenegger a bill providing some relief for homeowners facing foreclosure and for tenants in properties already foreclosed upon. The governor has indicated that he will sign the bill, which, if signed, would take effect immediately.

It would require lenders to contact homeowners by phone or in person at least 3o days before filing a Notice of Default, and also undertake discussions wit the homeowner about alternative options on repaying the loan.For tenants of foreclosed properties, the bill would increase the time before eviction of those tenants from the present 30 days to 60 days. This would give the affected tenants a bit more time to locate new quarters before having to move.

Separately, the bill also would allow local municipalities the authority to fine owners of vacant lots that are not being maintained. This is an attempt at slowing potential blight of an area that has been foreclosed upon.

The Latest On Possible Relief

As I mentioned five days ago, Congress is getting closer to passage of a new foreclosure relief bill. Today the Senate passed it by a huge margin. Now its differences must be reconciled with the House bill, after which it goes to the desk of the President. Bush has said he will veto it, claiming it's a bailout of the banks and also rewards what he terms irresponsible borrowing by the homeowners who, in his opinion, should have known better than to assume this much debt under the conditions of the loans made. Talk about blaming both ends of the same issue. This bill, once both versions match, is by far the best idea to come out of Congress in years, in the humble opinion of this observer. It directly deals with the major portion of the largest financial crisis since at least the Savings and Loan debacle of the 80's and perhaps the Depression. If you are in need of support on your home loans, call or write your representatives in the House and Senate and get this bill to the President's desk, and do it with such a large margin that even if it is vetoed, the veto can be overridden. That is a MUST!

Arrests and Veto Overrides

Two important things happened today, and at least one of them could provide vital assistance to homeowners fearing loss of their homes to foreclosure. The one that Could help homeowners is the one we've discussed here on a number of previous occasions--the Frank bill from the House of Representatives and its Senate mirror image. All along the Bush White House has threatened to veto the bill, saying it would be too costly and also could 'unfairly' cut into lender profits (as if all of the foreclosures weren't doing EXACTLY that already).

The Senate today beat back Republican attempts to gut the bill and passed it by veto-proof margins. Subject to a committee review of its effects vis-a-vis Countrywide, it may soon actually get to Bush's desk for his signature, and, if vetoed, back to both houses of Congress for the override vote.

The other item of interest, although too soon to see if it will be a basis for further assistance to homeowners and those who've already lost their homes, is a large mortgage fraud sting by the FBI. Citing various alleged violations of mortgage fraud laws, the Bureau obtained indictments or arrested hundreds of lenders from at least 19 separate lending institutions today. The makeup of the accused ranged from executives at the leading investment banking firm, Bear Sterns to employees of a number of other mortgage lenders and brokers. Is this too little-too late? Only time will tell. Stay tuned.